Must-know: The current state of the Greek economy

As of 2013, Greece is the 13th largest economy in the European Union (or EU). The EU has 28 members. The Greek economy mainly revolves around the service sector. It contributed close to 80% of the national economic output, followed by industry at 16%. Agriculture contributed ~4% of the national economic output in 2013, according to the World Bank.

Improving fundamentals

The strong export of goods and services enabled Greece to clock a high current account surplus of 2% last year. Other data including retail sales, car sales, industrial output, and construction and manufacturing activity indicates that the economy has probably bottomed out. The economy is expected to move out of recession this year.

Domestic demand in Greece has started to improve. It’s evident in the increase in private consumption in the first quarter on year-over-year (or YoY) terms for the first time in four years. Consumers’ unemployment expectations have declined. Greece has also made structural reforms. It has reduced nominal unit labor costs to below the average in the Euro area. This implies that competitiveness has been strengthened.

Greece’s debt-to-gross domestic product (or GDP) ratio increased to 174% in 2013. However, according to the International Monetary Fund (or IMF), it will stabilize and slowly start to decline from 2015. Overall, Greece seems to be moving towards positive yearly growth in GDP.

With improving fundamentals and investor confidence, Greece successfully returned to debt markets in April this year with a five-year bond issue. It attracted ~$27 billion in orders against an issue size of ~$4 billion.

Greece has also recently raised $2.04 billion in three-year notes with Bank of America Merrill Lynch (BAC), Citigroup (C), Deutsche Bank, Goldman Sachs (GS) and JPMorgan Chase & Co. (JPM) managing the sale. Continue reading the next part of this series to learn about the recent debt issue and Greece’s return to the debt market.